Experts advise having a 'savings buffer' equivalent to three months' salary in place, so that you have money available in the event of an emergency, such as a sudden increase in mortgage payments, or being unable to work due to an accident or illness.
But not everyone finds it easy to save up a nest egg, especially when times are tough. It's easy to feel that every penny gets swallowed up by bills.
In fact, a recent survey by moneysupermarket.com found that more than half of us are being forced to regularly dip into our savings simply to meet the cost of day-to-day living.
Easy access ISAs
It is important to keep some of your savings held in an easy access account so that you can get hold of your money quickly if necessary.
If you haven't yet used your ISA allowance this year, then you should do so, as you can save up to £5,100 in cash each year without the taxman taking a share of your returns.
For example, Principality's e-ISA Issue 2 pays 2.80% and you can transfer in existing savings, if you have managed to save into an ISA in the past.
If you have an existing ISA nest egg then the Santander Direct ISA Issue 6 is worth considering. If you have a balance of more than £9,000, it pays 2.75%, although you only receive 2.00% if you save less than that.
Other ways to save in a cash ISA
There are also fixed rate ISAs that pay higher rates of interest if you agree to lock away your money for a year or more. Generally speaking, the longer you can afford to lock up your savings, the better the rate you will get.
For example, the Halifax Fixed Rate ISA Saver pays a market-leading 4.25% for four years, on a minimum investment of £500. However, you can't touch your money during that time or you'll lose 180 days' interest on your savings.
Accounts if you've already used your ISA allowance
If you have already used your ISA allowance this year, then you may want to consider a standard easy access account.
With a £1 minimum investment, the current market-leading easy access account is the AA's Internet Extra Issue 3 account. It pays 2.80% but it can only be managed online, with withdrawals made to one nominated account.
There are lots of easy access accounts paying 2.75%, including Santander's eSaver 2, which can be managed online or via a cash machine.
The Post Office's Online Saver pays 2.75% too, but can only be managed via the web. Both those accounts are bolstered by a 12-month bonus, so the rate you receive will fall after the first year, when you'll want to start looking for another account.
ING Direct's Savings Account again pays 2.75% and this rate isn't boosted by a bonus. However, you'll still need to keep an eye on the returns you're receiving and be ready to move if it becomes uncompetitive.
Put a little aside each month
But if you are starting saving from scratch, a regular savings account is a great way to get in the habit of putting money aside every month. This kind of account tends to pay a higher rate on lower balances, so you don't need a big lump sum to invest.
To qualify for a regular saver deal, you must pay in a certain amount every month - usually between £25 and £250. Unfortunately, the cap means you can't save more in those months when you can afford to.
Most accounts also carry restrictions on the number of withdrawals you can make, usually only allowing one a year. Some won't allow any withdrawals at all without a penalty, for example, the loss of some of the interest you'd earned.
As with most savings accounts, be prepared to shift your money after the first 12 months.
Many banks and building societies now use a 12-month bonus to bolster their rates, so it's essential to watch out for this and be prepared to move your money after a year in order to earn the best returns.
It's also important to understand just how much interest you'll earn. If you pay in £1,000 over a year, bear in mind you will earn less than the headline rate on that total sum because you'll have been drip-feeding it into the account.
Despite the restrictions, regular saver accounts pay some of the highest rates available. So where are the top deals?
Best regular saver accounts
Top of the best buy tables is the Norwich & Peterborough Building Society's Family Regular Saver paying a great 5.00% in the first year, although you have to have dependent children under the age of 16 to qualify (under the age of 18 if they're in full-time education).
You save between £1 and £250 a month, on which you earn 2.00% in the first year. If you pay in an amount every single month and make no more than one withdrawal during the first year, you'll receive a 3.00% bonus, boosting your returns to a fantastic 5.00%.
However, after the first year that 2.00% rate will fall to the building society's variable rate, currently 0.50%. You can still earn the bonus of an extra 3.00% a year, but it's probably time to look for a more competitive account.
Of course, it's not just families that want to build up a financial safety net and there are many regular saver accounts paying 4.00%. That's an excellent rate compared to many easy access accounts, particularly if you've held yours for more than 12 months and the rate has dropped.
Santander's Fixed Rate Monthly Saver Issue 12, HSBC's Regular Saver and Norwich & Peterborough's Regular Saver, to name just a few, all pay 4.00%. However, they do all cap what you can pay in at £250 a month.
Meanwhile, Principality and Scottish building societies both have regular savings accounts that pay 4.00% but allow you to pay in up to £500 a month, so they will be better if you expect you'll want to save more.
Be aware that the rate on all these accounts will fall if you fail to make a payment in each month, or if you make too many withdrawals.
If you're looking for a regular saver account, it's worth browsing the ISA options too - the accounts work exactly the same, it just means you don't pay any tax on your returns.
Stroud & Swindon Building Society's Regular Saver (ISA Issue 1) pays a respectable 3.75% and you can invest between £25 and £425 a month. Investing the full amount each month would allow you to reach your cash ISA limit.
Alternative ways to save
You can also earn high rates of interest with some current accounts. For example, the Santander Preferred In-Credit Account pays an impressive 5.00% on balances up to £2,500.
Based on an average balance of £1,000, you'll earn £50 a year in interest. On top of that, you'll receive a £100 switching incentive, which could be a great way to start saving.
To qualify for this account, you'll need to pay in at least £1,000 every month. If you do keep savings in your current account, try to be disciplined about not touching them - keep the money for when you really need it.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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